Slowing Demand Leaves Airbus With Challenge To Break-Even On A380 Program In 2015

Airbus, which is under increasing pressure to prove the viability of its A380 production rates, yesterday conceded that it still needs to fill a “single-digit number” of production slots for the type in 2015.

Speaking during EADS’s first-quarter results conference call, CFO Harald Wilhelm—who also holds the same role at Airbus—stressed that it is a high priority to fill the remaining slots as quickly as possible.

Demand for the A380 has been declining for some time. The manufacturer also has reduced production this year from 30 aircraft to 25, to incorporate the newly designed wing rib-feet and spars that will become standard for new deliveries from 2014, a decision that has resulted in a significant inventory build-up and produced a €3.2 billion ($4.1 billion) negative free cash flow in the first quarter.

Should Airbus be forced to reduce the production rate in 2015, the program would almost certainly miss the goal to break-even that year. But Wilhelm remains “cautious about the further potential for break-even below 30.”

Airbus has firm orders for 262 A380s, 101 of which have been delivered. With a production rate of 30 aircraft a year, the backlog would be sufficient to fill more than five years of production.

Demand for Airbus’s A350, meanwhile, is surging, says Wilhelm. “The level of demand we see recently would make a very clear business case for an accelerated ramp-up of production,” says the CFO, although he cautioned that this would mean taking on additional risk. The A350 “remains a tough ride in terms of ramp-up of the other flight-test aircraft and production,” Wilhelm notes.

Wilhelm also reiterated Airbus’s official comment that the A350’s first flight will occur “in the summer,” adding that “for quite a number of months we have seen no further drift” in the schedule.

Airbus is understood to be planning to move MSN001 to the flight-testing department by the end of this week, which could lead to a first flight in early June, provided there are no last-minute technical issues to resolve.